Western District Case Notes

(This article originally appeared in The Bulletin, the official publication of the Bar Association of Erie County. It is reprinted here with permission.)

Personal Jurisdiction

In Hume v. Farr’s Coach Lines, Ltd., No. 12-CV-6378FPG (Nov. 3, 2016), an action sounding in negligence, strict products liability and breach of warranty resulting from a collision between a tractor-trailer and a coach bus, the seller of the allegedly defective bus moved to dismiss based on lack of personal jurisdiction. In support of its motion, defendant argued that it is a Canadian corporation that merely sells buses in Canada and essentially has no contacts with New York. The opposing parties argued that defendant is the alter ego of its New York-based parent, which gives rise to personal jurisdiction over defendant.

The Court began its analysis by observing that the test for determining whether a parent and its subsidiary are alter egos essentially consists of three factors: the subsidiary’s financial dependency on the parent; the degree to which the parent and subsidiary observe corporate formalities; and the parent’s control over the subsidiary’s operational policies. While the Court determined that there was no evidence submitted to support the first factor, it found that there was ample evidence to support the second and third. For example, an “Agreement on Intra-Group Services” entered into between defendant and its parent authorized defendant to issue checks, manage bank accounts, forecast and budget, and prepare contracts for its parent, all of which established that they were not operating at arm’s length. Moreover, nearly every director and officer of defendant throughout its corporate existence was also a director and officer of its parent at the same time, and with the same title and role. In addition, the Court found a lack of respect for corporate formalities, as evidenced by, among other things, commingling of funds in the parent’s bank account. Ultimately, the Court found that the parent did not regard defendant as a separate enterprise, leading to the conclusion that they are alter egos for jurisdictional purposes. Therefore, defendant’s motion to dismiss was denied.

ERISA

In Hall v. Lsref4 Lighthouse Corporate Acquisitions, et al., No. 16-CV-6461(EAW) (Nov. 10, 2016), plaintiff sued in state court for damages from an alleged breach by defendants of an executive retention plan (the “Plan”). After defendants removed the action to federal court under the Employment Retirement Income Security Act of 1974 (“ERISA”), plaintiff moved to remand on grounds that the Plan did not constitute an ERISA plan. Applying the three factor test set forth by the Second Circuit in Okun v. Montefiore Med. Ctr., 793 F.3d 277 (2d Cir. 2015) for determining when a plan is governed by ERISA, the Court agreed and granted the remand motion.

The employer’s obligations, with respect to the form and amount of severance and timing of payments, did not require managerial discretion in the Plan’s administration. Nor would any reasonable employee perceive an ongoing commitment by the employer to provide employee benefits under the Plan. And while the employer might be required to engage in some minimal separate analysis for each employee’s termination, that factor was insufficient to overcome the first two factors. In addition, the Plan had few of the “usual earmarks” of an ERISA plan, including no plan administrators, fiduciaries, administrative review, employee contributions, procedure to submit claims, or money set aside or held in trust, as well as no mention of any intent to be covered by ERISA or federal law generally.

Amendment of Pleadings

In White v. Fein, Such & Crane, LLP, No. 15-CV-438V(Sr) (Nov. 1, 2016), plaintiffs filed a class action complaint under the Fair Debt Collection Practices Act and New York General Business Law §349 concerning the attorneys’ fees defendant charged in mortgage foreclosure actions that it had previously commenced against plaintiffs. Prior to any discovery or class certification proceedings, plaintiffs moved to amend their complaint in order to “sharpen the class definitions” and “narrow the scope of the existing claims.”

Defendant opposed the motion on the ground that the proposed amended complaint was futile because the factual allegations in it were “false,” and supported that opposition with an affidavit from a partner of defendant, which detailed the firm’s business records, attorneys’ notes, and files related to the underlying foreclosure actions. Plaintiffs objected to defendant’s attempt to introduce “evidence” in opposition to their motion to amend, especially because no discovery had been conducted. After noting that it must confine its consideration to the facts stated on the face of the proposed amended complaint, the Court held that defendant’s submission was beyond the scope of plaintiffs’ proposed amended complaint and inappropriate for resolution within the procedural confines of the motion. As a result, the Court exercised its discretion and granted plaintiffs’ motion to amend their complaint.

Case Management Deadlines

In Willet v. City of Buffalo, et al., No. 15-CV-330A(MJR) (Oct. 31, 2016), prior to the pretrial dispositive motion deadline, certain defendants moved for summary judgment dismissing plaintiff’s complaint. After the Magistrate Judge issued a report and recommendation recommending that two causes of action be dismissed as against those defendants, another defendant moved to extend the dispositive motion deadline and for summary judgment to dismiss the same two causes of action on grounds that the report and recommendation was “law of the case.”

The Court denied the motion to extend the dispositive motion deadline and refused to consider the new motion for summary judgment. After noting that Rule 16 provides that a scheduling order may be modified “only for good cause,” the Court noted that to demonstrate good cause a party must show that the deadline could not have reasonably been met despite the moving party’s diligence. The Court concluded that moving party’s lack of diligence prevented him from establishing good cause for the extension, and that the merit in the underlying motion and plaintiff’s failure to oppose that motion were not relevant to the good cause determination.

Case Management Deadlines

In Burzynski v. United States of America, No. 13-CV-766S (Oct. 27, 2016), plaintiff sought damages under the Federal Tort Claims Act for injuries he allegedly sustained in an automobile collision caused by defendant’s employee. After discovery concluded, defendant timely moved for summary judgment. Plaintiff opposed the motion by arguing that additional discovery was required and moved to extend the discovery deadline. Although the deadline for dispositive motions too had passed, plaintiff also cross-moved for partial summary judgment.

The Court denied the motion to extend the discovery deadline, finding that plaintiff failed to submit the required Rule 56(d) affidavit to identify those facts that were essential to opposing the summary judgment motion but were not available without further discovery. Even without the required affidavit, plaintiff in his opposing memorandum had not sufficiently justified the need for the requested discovery, having failed to establish any excusable neglect for his failure to conduct the requested discovery prior to the discovery deadline. Moreover, plaintiff had not described what testimony he expected to elicit that was not already addressed in documents already in the record that were authored by the same witness. The Court then determined plaintiff’s cross-motion for summary judgment was inexcusably late.

Although the Court might consider an untimely cross-motion for summary judgment if that motion addressed the very same claims on which the underlying motion was based, plaintiff’s cross-motion did not overlap with the facts and legal issues under consideration in defendants’ motion. Finally, the Court denied defendant’s motion for summary judgment because there were genuine issues of material fact concerning whether plaintiff sustained a “serious injury” as required under New York’s Insurance Law.

Fair Debt Collection Practices Act

In Douglass v. Forster & Garbus LLP, No. 16-CV-6487CJS (Oct. 26, 2016), plaintiff claimed that a debt collection letter from defendant violated the Fair Debt Collection Practices Act because the letter failed to disclose that the amount plaintiff owed may increase due to interest and fees. Defendant moved for judgment on the pleadings and, when plaintiff submitted an affidavit in opposition to the motion, the Court converted it to a motion for summary judgment in accordance with Fed. R. Civ. P. 12(d).

In support of its motion, defendant claimed that plaintiff was “well aware” that her indebtedness could increase based on the accumulation of interest and fees, as evidenced by the fact that plaintiff had received notice of 42 prior wage garnishments in connection with judgment enforcement proceedings on the underlying debt. The Court rejected defendant’s argument regarding constructive notice, finding that recent Second Circuit precedent was “crystal clear,” and defendant’s failure to indicate in its letter that interest and fees would continue accruing beyond the date of the letter constituted “a false, deceptive, or misleading representation.” Accordingly, defendant’s motion was denied.

Kevin M. Hogan is a partner with Phillips Lytle LLP where he concentrates his practice in litigation, intellectual property and environmental law. He can be reached at [email protected] or (716) 847-8331. Sean C. McPhee is a partner with Phillips Lytle LLP where he focuses his practice on civil litigation, primarily in the area of commercial litigation. He can be reached at [email protected] or (716) 504-5749.